Manoeuvre, what the family quotient is and what the government is planning for families with children

Those with more children pay less tax. In the magnum sea of proposals that accompany, as usual, the preparation of the economic manoeuvre, here appears what could be qualified as a sort of 'family quotient' start that rewards larger families. Economy Minister Giancarlo Giorgetti's plan would go in this direction: to insert a cap on tax deductions based on income and the number of children. While the government's intention is clear, the choice of the most suitable route must be commensurate with both the practical feasibility of the proposal and the costs involved, and thus the identification of the relevant resources. This is a decisive aspect for a manoeuvre that moves within the tight constraints imposed by the infringement procedure for excessive deficit opened in June by Brussels and by the new rules of the Stability Pact.

This is not the first time Giorgetti has raised the issue of boosting the birth rate. In 2023, the Economy Minister had launched the proposal to 'not make families with more than two children pay taxes and to build the manoeuvre around a concrete idea of changing tax deductions'. The problem is real. The question is whether this is the most suitable path. If one looks at the government's programmatic intentions, the starting ambition was different. It was aimed at the introduction of the family quotient tout court through an intervention in the taxation system of households by dividing the total income by the number of its members on the basis of coefficients, without taking into account the composition of assets, as the Indicator of the Equivalent Economic Situation (the ISEE) does. The introduction of the family quotient appears in the government programme illustrated on 25 October two years ago in Parliament by Prime Minister Giorgia Meloni: 'To get out of the demographic glaciation and return to producing those years of the future, that demographic GDP we need, we need a massive plan, economic but also cultural, to rediscover the beauty of parenthood and put the family back at the centre of society. It is therefore our commitment, also made in the election campaign, to increase the amounts of the single and universal allowance and to help young couples obtain a mortgage for their first home, working progressively for the introduction of the family quotient'. The calculation should take into account the total income of the family and the coefficient that depends on the number of members, corrected by an equivalence scale.

Evaluations at the technical and political level are ongoing. From what is emerging, the idea would be to act on the side of certain deductions, discounts and deductions for large families, such as expenses for education, school canteens or sports, raising the ceiling of deductible charges. An operation to be accompanied by the single allowance, which incorporated various other subsidies that were paid to families, including the baby bonus, deductions for dependent children and family allowances. The cost of the operation varies depending on the ceiling set for the new deductions and the number of beneficiaries. The 'family quotient' remains a goal of the legislature, which seems difficult to implement at the moment. The criticism that has so far been levelled at the introduction of the family quotient is that certainly the spouse with the highest income would have the greatest tax advantages. Not so the one with the lowest income. The system would end up benefiting high-income families, while being less convenient for low-income families, as well as single-income families. For all the hypotheses under consideration, a detailed reconnaissance of the resources available to finance the new costs that would result is first of all required.

The hypothesis being studied, all to be verified in the course of the work, is to launch that operation of thinning out and rationalising tax benefits that has been announced many times but has never taken off until now. According to the calculations made by the Parliamentary Budget Office, this would involve intervening on the 625 bonuses, deductions and discounts of various kinds (which have risen over time), which entail a revenue shortfall of 105 billion lire. Moreover, taking into account what was claimed at the end of July by the undersecretary to the Economy Federico Freni replying in the Budget Committee of the Chamber of Deputies to the questions of the Pd deputies Maria Cecilia Guerra and Chiara Braga: in line with what is reported in the tables of the last annual report on the subject attached to the Nadef, tax expenditures are actually 625, but are reduced to 412 if we exclude the items considered non-compressible (home, health, education, social policies and welfare). The problem is that, by the government's explicit admission, there are as many as 118 items deemed 'unquantifiable, due to lack of data or the characteristics of the measure itself'. Another 50, on the other hand, have expired, and therefore have exhausted or are exhausting their effects. The thinning out operation is therefore expected to be rather complex and the relative revenue to be recovered - according to the first simulations and except for the most relevant tax deductions that have a direct impact to mitigate the progressivity of the levy - would not exceed one billion, while the figure hypothesised for the entire package of measures on the birth rate would be around 5-6 billion.